Linn Energy leaves bankruptcy as two private corporations

1of5Pumpjacks in Utah's Uinta Basin tap wells of Houston-based Linn Energy, which said on June 30, 2014 that it was acquiring additional assets in the West and other regions from Devon Energy.Photo: Linn Energy

2of5A pump jack looms over a worker at a Linn Energy site in the Permian Basin of West Texas. Much of the increase in drilling activity has been in the Permian.Photo: Linn Energy

3of5Oil rigs were stacked for storage near Midland in early 2016. Before the recent oil slump, Linn Energy was a darling of Wall Street as a tax-advantaged master limited partnership.Photo: MICHAEL STRAVATO, STR

4of5A pumpjack rocks back and forth as the sun sets Wednesday April 2, 2014 in Stanton, Texas. Oil exploration in the area has raised property values and many other rates much like in the Eagle Ford area.Photo: JOHN DAVENPORT, Staff

5of5Texas' energy regulator has lots of data, but the agency must rely on a patchwork system to access it.Photo: Eric Gay, STF

Houston's Linn Energy, one of the largest businesses to fall into bankruptcy during the oil bust, emerged from the process Tuesday as two separate private companies.

Linn said it exited its Chapter 11 restructuring with plans to sell much of its acreage in South Texas and West Texas' Permian Basin. Linn and Berry Petroleum, which Linn bought for $4.3 billion in 2013, will operate as separate companies.

The acquisition of Berry near the height of the oil boom made Linn one of the biggest independent oil and gas giants, but also saddled it with debt that proved too large to support after oil prices began their slide in the summer of 2014. At the time of the deal, Linn was a darling of Wall Street, growing as a tax-advantaged master limited partnership that made it easier to expand and attract investors.

In May though, Linn filed for the largest MLP bankruptcy ever with $8.3 billion in debt. Linn ranks as one of the largest of at least 240 oil and gas bankruptcies in North America - more than half of which were Texas-based - during the two-year oil bust and its aftermath.

Mark Ellis, who became chief executive of Linn, will remain president and CEO of the new Linn. He'll also sit on the new Linn board of directors. Just three months before Linn filed bankruptcy, Ellis was awarded a $6.9 million target bonus, up from just over $1 million in previous years.

Under the reorganization, creditors received ownership stakes in the two companies. Shareholders, however, were left with almost nothing. Some are seeking damages in court.

Linn said Tuesday its debt load is down to about $1 billion. Ellis, in a prepared statement, touted Linn's "foundation for future success."

He highlighted Linn's growth opportunities, specifically in burgeoning shale plays in Oklahoma. Linn also cited strong potential in East Texas and the Rockies.

To help pay creditors, Linn plans sell nearly 250,000 net acres of assets, including 130,000 acres in natural gas-rich South Texas and 90,000 acres in the Permian Basin, where oil drilling is booming again, and another 20,000 acres in North Dakota.

Kevin Kaiser, an analyst with the Connecticut-based Hedgeye Risk Management research firm, was one of the few who early on predicted Linn's downfall. He often highlighted Linn's long history of excessive investor payouts and massive accrued debt.

Jordan Blum is a senior energy reporter at the Houston Chronicle since 2015. He has extensively covered the industry from the 2014 bust in oil prices to the more recent boom in West Texas’ Permian Basin. He has written about everything from Texas’ national lead in renewable wind power to the Houston area’s growing dominance in petrochemical and plastics manufacturing.

Previously, Jordan was an award-winning reporter at The Advocate in Baton Rouge and New Orleans as a statehouse reporter and education writer, and then as the newspaper’s Washington Bureau chief. Jordan is a New Orleans native who graduated from Texas Christian University with a journalism degree before going back to work at daily newspapers in Louisiana.